Airline crisis sends BA after quick supply chain savings

The global crisis in the airline industry after the terrorist attacks on the US has forced British Airways to revamp its supply strategy to make immediate savings.

Only last year, the airline formed a strategic sourcing programme that aimed to reduce procurement spend by £177 million, or 5 per cent, by 2002. Central to the strategy was a division of supplies into 45 product categories, to be managed across the 150-strong buying team.

Jonathan Counsell, procurement strategic general manager, told SM that the events of 11 September forced the company to refocus on "quick win" savings.

"We've had to look at those areas that have an immediate cash impact," he said. "The other 20 categories have been delayed and will be reviewed for inclusion in six months' time."

Most airlines have cut services and staff, and last week, the Belgian carrier Sabena filed for bankruptcy. Demand will drop for the foreseeable future while airlines focus on core supplies, although Middle East airline Emirates last week announced orders worth over £10 billion.

British Airways' savings, some of which will be won through the BA-backed trading exchange Cordiem, will be crucial to avoiding a further downturn in its fortunes. The struggling airline has cut more than 5,200 jobs and withdrawn 20 aircraft since 11 September, and traffic volumes in October fell by nearly a quarter year on year.

Counsell said the company had prioritised its preferred suppliers. No changes have yet been made to an existing plan to reduce the supply base from 20,000 to 2,000 by next year.

He added that BA was likely to accelerate its plans to put 200 suppliers' catalogues on a recently-installed Ariba e-requisitioning system by mid-2002.